Before China’s crackdown on cryptocurrency, Cathie Wood’s ARK investment fund was the US’s best-performing equity funds investment firm. But after china’s aggressive clampdown on cryptocurrency, the firm now ranks among the worst-performing investment fund firms.
China, Bitcoin, And ARK Investment Fund
ARK investment founder, Cathie Wood, is a strong BTC advocate, and its investment firm has invested about $1B in Coinbase global inc., an amount that represents 5% of almost $22B funds. However, Coinbase shares dropped more than 1.6% following yesterday’s news of Chinese authorities’ complete ban on all crypto-related transactions.
Following the news, there was intense selling pressure on the leading cryptocurrency. Thus, it lost more than 5.5% of its value, while ARK’s investment also dropped by 1.5% since that time.
Main Holdings’ Struggles
Many of Cathie Wood’s primary holdings have struggled so far this year. Strangely their struggles happened when the market was bullish and when the S&P 500, often used as a standard of investment measurement, gained almost 19% so far this year. Her other top holdings in Zoom, Tesla, and Teladoc Health inc have also plummeted as there is a massive shift towards the work-from-home model hastened by last year’s pandemic.
Even the holdings of her investment firm are also not spared. The firm is down by more than 4.5% in its YTD, which has now lowered its rankings among the top 600 SME fund companies in America.
Long-Term Performance Keeps Retail Investors On Board
Even though the firm’s YTD performance is down by more than 4.5%, its long-term analysis paints a better story. The fund’s annual yield percentage of 42.55% in the last half a decade puts it among the top 1% of its peers. Todd Rosenbluth, a top-level executive, opined that this past solid performance had prevented retail investors from moving their investments to other investment firms.
Hence, the firm’s poor performance in recent times doesn’t matter. Rosenbluth said, “ARK might be lagging behind ETFs in a similar category, but investors are not running away with their money. Their loyalty is based on previous solid performances. However, if this current poor showing doesn’t cease soon, no one can judge them if they chose other options.”
ARK ranks 11th in order of largest-issuing owned assets, and its ETFs are valued at about $42.5b. The firm was previously among the top 10 ranked firms at the start of the year because Wood’s foresight attracted many investors. Now that the company’s ETF is performing poorly, it might struggle with increased competition. Two of its main competition, WisdomTree and dimensional fund advisors (DFA), are already making moves to gain a foothold on ARK’s clients.
Sitting On Solid Inflows
Nobody should write off Wood’s firm yet as its investment inflows in this fiscal year is still over $12B and a total ETF of over $41B. A renewed interest in tech stocks would trigger more investment inflows.
Once the firm can get through this challenging period, the ARK bandwagon effect may kick in again. One thing is clear, the battle between ARK and its competition to be a leader in this space will be ongoing for some time.
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